Why do firms cross‐list their shares on foreign exchanges? A review of cross‐listing theories and empirical evidence

Purpose – Financial markets’ integration and technological advances in equity trading may have reduced the potential benefits from listing a firm's shares on a foreign exchange. Nevertheless, a significant number of firms continue to cross‐list every year. This paper examines the recent cross‐listing trends and reviews the literature on motives to cross‐list. Design/methodology/approach – The literature review includes a summary of theoretical studies grouped into cross‐listing theories including market segmentation, liquidity, investor recognition, information disclosure, legal bonding, proximity preference and business strategy theories, and also includes a discussion of testable implications and empirical evidence for each of the above mentioned cross‐listing theories. Findings – An extensive cross‐listing literature offers a number of theories on the motives to cross‐list that in most cases complement each other by encompassing different aspects of the complex cross‐listing behavior. Nevertheless, continuous market developments, such as significant regulatory and technological changes in the ways capital markets operate, raise new questions on why firms cross‐list and call for further research to continue.